Livonia, MI asked in Tax Law for Michigan

Q: Question about a Michigan state tax lien?

Hello, I had some questions regarding a state tax lien that I learned was filed against me almost two months ago. The situation is tricky, I was made president of a business after a relative passed, business eventually closed and sales tax forms were not submitted. I was notified that a tax lien was filed against me in the computer generated amount, currently working with the state to file the missing paperwork and they've agreed to pause further collection attempts in the meantime. Once calculated, I'll be working to pay the amount due.

Now, considering this lien was filed with the county register of deeds containing only my name, does it actually attach to any legal title/deed I might own, or does it only attach if the state moves forward with more aggressive collection attempts? For example, if I have a car that's financed and I decide to sell, so long as the bank is paid the car can be sold correct? I don't own any real estate, and our only car is financed. No other assets.

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1 Lawyer Answer
James L. Arrasmith
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  • Tax Law Lawyer
  • Sacramento, CA

A: In Michigan, when a state tax lien is filed, it generally attaches to all of your current and future property and rights to property. This includes both real estate and personal property. The lien is effective from the date it is filed until your tax debt is paid in full or the lien expires.

Even though the lien is in your name, it doesn't automatically mean it attaches to specific property like a financed car. However, it can potentially affect the sale of such property. If you decide to sell your financed car, the lien doesn't directly prevent the sale, but the process may be complicated if the lien amount is greater than the equity in the car. The lender's lien on the car has priority, so they would be paid first from the sale proceeds.

If there's any remaining equity after paying off the car loan, the state may claim that amount to satisfy the tax lien. If there's no equity, the state tax lien might not receive any payment from the sale.

It's important to communicate with the Michigan Department of Treasury and possibly consult with a tax professional or an attorney. They can provide guidance specific to your situation and help you understand how the lien affects your property and any transactions you're considering.

Remember, addressing the underlying tax debt and working towards resolving it is crucial. The state’s agreement to pause collection efforts while you file the necessary paperwork and determine the amount due is a positive step. Managing this process effectively can help minimize the impact of the lien on your financial situation.

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